Clothing & Footwear Retailing in China Market Summary & Forecasts

Clothing & Footwear Retailing in China Market Summary & Forecasts Comprehensive overview of the market, consumer, and competitive context, with retail sales value and forecasts to 2018 Report Code: RT0058SR Report Price: US$1,250 (Single Copy) www.conlumino-winesandspirits.com

Summary Clothing & Footwear Retailing in China Market Summary & Forecasts, report, published by Conlumino, provides a detailed analysis of both the historic and forecast market data of clothing and footwear retail sales across key channels in China. In addition, it provides an overview of changing shopping trends, government policies towards business, the influence of various economic variables on the retail industry, the competitive landscape and detail of key retailers. Key Findings Strong economic growth and the move to become a consumer led economy will be just one factor driving significant growth in Chinese retail sales to 2018 A changing shopping mode- from functional, deal driven to emotional, status driven, is creating new opportunities for both value for money and premium products The success of international fashion brands opens up new opportunities for international mass market and value led brands in clothing and footwear in China Modern retailers contribute less than one-fourth to the category sales both for clothing and footwear Reasons to Buy The report provides a comprehensive overview of the Chinese clothing and footwear retail market for companies already operating in and those wishing to enter the Chinese market. Understand which channels will be the major winners and losers over the coming years and plan accordingly, with a comprehensive coverage covering 6 sub-product sectors that include: Men s Clothing, Women s Clothing, Children s Clothing, Men s Footwear, Women s Footwear, Kids Footwear. Benefit from a detailed analysis of vital economic and population trends and key consumer trends influencing the retail market. Monitor the competitive landscape with the analysis of key international and domestic players in clothing and footwear market. 2

China Luggage and leather goods Retail Sales and Forecast (CNY), By Channel Group, 2008 2018 Clothing & Footwear Retailing in China Market Summary & Forecasts 1. Retail Product Sectors 1.1 Product Sector Topline 1.1.1 Clothing and Footwear Clothing and footwear contributed xx% towards the apparel, accessories, luggage and leather goods category group in 2013 decreasing its share from xx% in 2008, and reaching retail sales of CNYxx billion in 2013 compared to CNYxx billion in 2008. Conlumino forecasts the category to record retail sales of CNYxx billion, during the forecast period. Specialist retailers were the main retail channel for the category group in 2013, with xx% of the category being sold through this channel. Figure 1: China Clothing and Footwear Retail Sales and Forecast (CNY bn), by Channel Group, 2008 2018 Online retailers Value retailers General retailers Specialist retailers 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Conlumino Conlumino 3

Table 1: China Clothing and Footwear Retail Sales (CNY bn), by Channel Group, 2008 2013 Channel group 2008 2009 2010 2011 2012 2013 CAGR (%) 2008 2013 Specialist retailers General retailers Online retailers Value retailers Overall Source: Conlumino Conlumino Table 2: China Clothing and Footwear Retail Sales Forecast (CNY bn), by Channel Group, 2013 2018 CAGR (%) 2013 Channel group 2013 2014 2015 2016 2017 2018 2018 Specialist retailers General retailers Online retailers Value retailers Overall Source: Conlumino Conlumino Table 3: China Clothing and Footwear Retail Segmentation, by Channel Group, 2008 2018 Channel group 2008 2013 2018 Specialist retailers General retailers Online retailers Value retailers Overall Source: Conlumino Conlumino 4

1.2 Product Sector Analysis 1.2.1 Clothing The clothing market in China is considered the world s largest fashion market after the US, but with the advantage of huge growth potential, thanks to its status as a relatively new market. A large population with increasing per capita clothing consumption provides a lucrative business environment for both domestic and international brands. In addition, the increasing demand for, and availability of, international brands among the fashion hungry younger generations of China has resulted in higher spending on clothing. The Chinese clothing market is expected to maintain a healthy growth, of xx%, to 2018. Rising disposable income in both rural and urban regions, strong economic development, and improving living standards will support growth. With a population of xxx million and huge economic growth, China holds immense opportunities for the clothing market. Clothing consumption per capita is expected to grow at a CAGR of xx% over the next five years. China is in the process of urbanization, where a large number of populations have become urban residents. According to the National Bureau of Statistics of China, xx% of the total population lived in urban areas in 2013, in comparison to xx% in 2000. Changing consumer lifestyles have influenced buying behavior, resulting in higher spending on fashion and the premium clothing segments. Women s wear constitutes over half of spending in the Chinese clothing market, and is projected to grow by xx% during 2013 2018. Growth can be attributed to women working and leaving family life until later, increasing disposable incomes, an eagerness to keep up with the latest fashion trends, and the greater availability of new entrants, more stores, and online stores. Figure 2: Share of Clothing in overall Retail 2013 and 2018 2013 Clothing Share of total Retail 2018 Source: Conlumino / Conlumino 5

Figure 3: Retail Sales Value and Growth (CNY Billion, %) of Clothing 2013-2018 Source: Conlumino Conlumino Table 4: China Clothing Retail Sales (CNY bn), by Segment, 2008 2013 Segment 2008 2009 2010 2011 2012 2013 CAGR (%) 2008 2013 Men's Wear Women's Wear Children's Wear Overall Source: Conlumino Conlumino 6

Table 5: China Clothing Retail Sales (CNY bn), by Segment, 2013 2018 Segment 2013 2014 2015 2016 2017 2018 CAGR (%) 2013 2018 Men's Wear Women's Wear Children's Wear Overall Source: Conlumino Conlumino Figure 4: Online Share of Total Clothing Spend 2013 and 2018 2013 2018 Online Share of total Clothing Spend Online Source: Conlumino Conlumino 7

Summary Methodology Overview All data in this series of retail reports from Conlumino is rigorously sourced using a comprehensive, standardized methodology. This methodology ensures that all data is thoroughly researched and cross checked against a number of sources and validation processes. At the core of this methodology is a triangulated market sizing approach, which ensures that results from different sources and approaches, including Conlumino s own industry surveys, are compared and a final consensus number between these inputs is derived. In addition, standardized processes and quality controls across the entire data collection, analysis and publication process ensure compliance and cross checking of the data occurs at each stage of the methodology. The triangulated market sizing method The triangulation method ensures that the results from three distinct phases of the research are brought together and cross compared before finalized market numbers are derived: 1. Existing internal resources: as retail data is compiled using a rolling annual program of industry research, the first stage of producing the data is to review the existing internal information, both from the last major data release, as well as that which has been collected on an ongoing basis throughout the year. This includes inputs about market as well as individual retailer performance. These sources are then reviewed and incorporated into data collection processes and databases before the second intensive phase of desk research. 2. Extensive desk research: this phase of the methodology incorporates the main phase of secondary research. This research is initially conducted across a wealth of information sources, as listed below. In addition, the results of any relevant surveys from other Conlumino projects are also fed into data collection sheets. Online industry surveys can include industry opinion surveys of retailers and their suppliers sentiment and consumer surveys of purchasing and retail behavior. Secondary sources include, but are not limited to, the following: a. Industry surveys b. Industry and trade association research c. Trade portals d. Company filings and analyst presentations e. Broker and investment analyst reports f. International organizations g. Government statistics h. Retail media i. National Press, including both business and consumer titles 3. Market modeling: the next stage in the process is to feed the results of the above into market models, which also include drive based forecasting tools which analyze drivers such as disposable income, product uptake, macro economic drivers and market momentum in order to fill in any gaps in the data and update forecast numbers. At this stage, the market models also look to update channel 8

distribution data sets. For example, information found at the research and trend monitoring stage on online retail sales would directly affect the channel distribution models. 4. Data finalization: the final stage of the process is the true triangulation of all the previous inputs. At this stage data is created using the inputs to hand in a bottom up fashion, starting with the inputs from each of the previous three stages of the process for each data point to be published. This is done for all the product, channel and country combinations covered in the data. At this stage, therefore, the project analysts are constantly evaluating and deciding upon the relative merits of each of the inputs from the research processes. Once a triangulated set of data has been finalized, these outputs are then thoroughly cross checked using a series of top down checks which review the data against a series of reference benchmarking, including known overall retail sizes, growth trends and per capita spending rates. Figure 5: The Triangulated Market Sizing Methodology Source: Conlumino / Conlumino 9

Industry surveys in the creation of retail market data Stage 2 of the above process includes using the outputs of Conlumino s surveys of consumers packaged goods consumption and industry opinion. Every year Conlumino completes a large scale survey, with over 120,000 responses, covering CPG purchasing and consumption habits in 10 core retail markets around the globe. This major study, cross-referenced against the primary telephone research of product market sizes by country, provides outputs against which relevant retail market data, focusing on the grocery channel and core products in this channel are assessed. It should be noted that overall, this feeds research into 3 of the 25 product categories covered. In addition, any other suitable surveys conducted by Conlumino which also provide information on retail markets are mined for information to be put into the data finalization process. Quality control and standardized processes Crucial to the function of the above method is the adoption of strict definitions for all products and channels, and adherence to a standardized process at each and every stage in the methodology. By following this approach all data is made cross-comparable across countries to ensure that analysis adds to the understanding of market dynamics and trends. The key elements of this approach are: Strict channel definitions: the definition of each channel is the same in every country; Strict product definitions: the definition of each product is the same in every country; Standardized processes: o Data capture all data received as part of the research is captured in standardized files and in a standard format. Any workings that analysts carry out on inputs, for example to correct for misalignment in category coverage, are also covered in these sheets o Data creation all modeling and forecasting approaches are standardized in order to ensure consistency o Finalization and verification systematic methods and approaches are used to finalize data points Country by country research structure: all research is conducted country by country in order to ensure that market data reflect local market trends and contexts Data checks during bottom-up creation: during the data creation and finalization stage analysts refer back to initial sources and inputs in order to ensure accuracy in the data Top down data audits and cross-checks: a large series of cross-checks across all the different dimensions of the final data sets are run in order to identify any outliers or trends that do not fit with Conlumino s market understanding, as well as to conduct specific analyses against set proofing criteria, such as abnormal growth rate changes, verifying data at both the overall and detailed level against research inputs and checking per capita spends against other analysis of consumers spending in a country Hierarchical review processes: finally, all of the above processes are subject to a hierarchical review process which ensures that not only the core analysts within a team look at the data, but that at each stage data is passed through several management layers in order that queries and data review and sign-off are completed before any final data can be published 10

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Table of Contents 1. Introduction... 6 1.1 What is this Report About?... 6 2. Executive Summary & Outlook... 7 3. Market Context... 8 3.1 A strong economy with major growth potential for retailers... 8 3.1.1 Resilient GDP growth makes China 2 nd largest global economy... 8 3.1.2 Widening social welfare provisions should free up high savings levels... 11 3.1.3 Employment shift from unskilled to skilled, rural to urban, manufacturing to service industries. 12 3.1.4 Wage growth above inflation... 14 3.1.5 Household consumption trebles driving spending power... 15 3.2 Large population with growing prosperity makes China a big attraction for retail... 19 4. Chinese Shoppers... 24 4.1 From functional to emotional... 24 4.2 More opportunity for niche brands and mass market retailers... 26 4.3 Shopping a leisure activity... 26 4.4 Two major events drive retail spend in China... 26 4.5 High adoption of smartphones and tablets for shopping... 29 4.6 Counterfeiting forces consumers to trade up to premium for quality assurance... 30 4.7 Tourism /travel increases awareness of international brands... 30 5. Doing business in China... 33 5.1 Summary... 33 5.2 Anti-corruption crackdown requires careful handling for foreign businesses... 34 5.3 Complex licensing procedures a hindrance for foreign retailers... 35 5.4 Favorable tax structure to encourage domestic and foreign investments... 37 5.5 Impact of government regulations on the luxury market... 37 6. Retail Product Sectors... 40 6.1 Product Sector Topline... 40 6.1.1 Clothing and Footwear... 40 6.2 Product Sector Analysis... 43 6.2.1 Clothing... 43 6.2.2 Footwear... 51 12

6.3 Major Retailers... 59 6.3.1 Clothing... 59 6.3.2 Footwear... 62 7. Appendix... 64 7.1 Definitions... 64 7.1.1 This report provides 2013 actual sales; while forecasts are provided for 2013 2018... 64 7.2 Summary Methodology... 69 7.2.1 Overview... 69 7.2.2 The triangulated market sizing method... 69 7.2.3 Industry surveys in the creation of retail market data... 71 7.2.4 Quality control and standardized processes... 71 7.3 About Conlumino... 72 7.4 Disclaimer... 72 13

List of Figures Figure 1: GDP Value (US$ Billion), 2007 2013e... 9 Figure 2: Growth Rate of GDP (%), 2007 2013e... 10 Figure 3: Forecasts for GDP Value and Growth (US$ Billion, %) 2013 2018... 11 Figure 4: Household Savings Rate as Share of GDP (%), 2003 2013... 12 Figure 5: Share of Employment by Sector (% of Total Labor Force), 2003&2013e... 13 Figure 6: Unemployment Rate (% of Total Labor Force), 2003 2013e... 13 Figure 7: Wage & Inflation Growth Rates (%), 2003 2013... 14 Figure 8: Household Consumption Expenditure of China (US$ Billion), 2003 2013... 15 Figure 9: Household Consumption Expenditure of Major Countries (US$ Billion), 2013... 16 Figure 10: Growth of Household Consumption Expenditure (%), 2003 2013e... 16 Figure 11: Disposable Income Value (CNY) 2003 and 2013... 17 Figure 12: Rural and Urban Populations (millions) 2003, 2013 and 2018... 18 Figure 13: Total Population and Growth Rate (Millions, %), 2003 2018... 20 Figure 14: Population Split by Gender (%), 2013and2018... 20 Figure 15: Population Split by Age Group (%), 2013 and 2018... 22 Figure 16: Per Capita Spend on Retail (CNY), 2005and 2013... 23 Figure 17: Per Capita Spend on Retail by Age Group (%), 2005and 2013... 23 Figure 18: The Changing Chinese Shopper... 25 Figure 19: Chinese New Year sales 2010-2014... 27 Figure 20: Single Day sales 2009-2013... 28 Figure 21: M-tailing in China... 29 Figure 22: Prime Destination for Chinese Tourists Bar charts 2003 and 2013 E... 31 Figure 23: Major Cities with High Spend on Retail... 32 Figure 24: Key Components of Doing Business in China Matrix... 33 Figure 25: Individual Income Tax and Enterprise Income Tax Rates in China... 37 Figure 26:Key Market Entry Requirements for China 2013... 39 Figure 27: China Clothing and Footwear Retail Sales and Forecast (CNY bn), by Channel Group, 2008 2018... 40 Figure 28: Share of Clothing in overall Retail 2013 and 2018... 45 Figure 29: Retail Sales Value and Growth (CNY Billion, %) of Clothing 2013-2018... 45 Figure 30: Spend per Head on Clothing 2013 and 2018... 46 Figure 31: Share of Clothing by Women s Wear, Men s Wear and Children s Wear 2013 and 2018... 46 Figure 32: Women s Wear Sales Value and Growth (CNY Billion, %) 2013-2018... 48 Figure 33: Men s Wear Sales Value and Growth (CNY Billion, %) 2013-2018... 49 Figure 34: Children s Wear Sales Value and Growth (CNY Billion, %) 2013-2018... 49 Figure 35: Online Spend in Clothing 2013-2018... 50 Figure 36: Online Share of Total Clothing Spend 2013 and 2018... 50 Figure 37: Spending per Channel in Clothing (%) 2013 and 2018... 51 Figure 38: Share of Footwear in overall Retail 2013 and 2018... 52 Figure 39: Retail Sales Value and Growth (CNY Billion, %) of Footwear 2013-2018... 52 Figure 40: Spend per Head on Footwear 2013 and 2018... 53 Figure 41: Share of Footwear by Women s Footwear, Men s Footwear and Children s Footwear 2013... 53 Figure 42: Women s Footwear Sales Value and Growth (CNY Billion, %) 2013-2018... 55 Figure 43: Men s Footwear Sales Value and Growth (CNY Billion, %) 2013-2018... 56 Figure 44: Children s Footwear Sales Value and Growth (CNY Billion, %) 2013-2018... 56 Figure 45: Online Spend in Footwear 2013-2018... 57 Figure 46: Online Share of total Footwear Spend 2013 and 2018... 57 Figure 47: Spending per Channel in Footwear (%) 2013 and 2018... 58 Figure 48: The Triangulated Market Sizing Methodology... 70 14

List of Tables Table 1: Custom Duty Rates and Consumption Tax Rates of Luxury Goods... 38 Table 2: China Clothing and Footwear Retail Sales (CNY bn), by Channel Group, 2008 2013... 41 Table 3: China Clothing and Footwear Retail Sales Forecast (CNY bn), by Channel Group, 2013 2018... 41 Table 4: China Clothing and Footwear Retail Sales (USD mn), by Channel Group, 2008 2013... 42 Table 5: China Clothing and Footwear Retail Sales Forecast (USD mn), by Channel Group, 2013 2018... 42 Table 6: China Clothing and Footwear Retail Segmentation, by Channel Group, 2008 2018... 43 Table 7: China Clothing Retail Sales (CNY bn), by Segment, 2008 2013... 47 Table 8: China Clothing Retail Sales (CNY bn), by Segment, 2013 2018... 47 Table 9: China Clothing Retail Sales (USD mn), by Segment, 2008 2013... 47 Table 10: China Clothing Retail Sales (USD mn), by Segment, 2013 2018... 48 Table 11: China Footwear Retail Sales (CNY bn), by Segment, 2008 2013... 54 Table 12: China Footwear Retail Sales (CNY bn), by Segment, 2013 2018... 54 Table 13: China Footwear Retail Sales (USD mn), by Segment, 2008 2013... 54 Table 14: China Footwear Retail Sales (USD mn), by Segment, 2013 2018... 55 Table 15: Key Clothing Retailers in China... 59 Table 16: Key Footwear Retailers in China... 62 Table 17: China Exchange Rate CNY USD (Annual Average), 2008 2013... 64 Table 18: China Exchange Rate CNY USD (Annual Average), 2014 2018 Forecasts... 64 Table 19: Conlumino Retail Channel Definitions... 65 Table 20: Conlumino Retail Category Definitions... 67 15

About Conlumino Disclaimer Conlumino Global Retail offers a comprehensive 360 view of the retail landscape. A team of analysts, with more than 200 years of combined experience, help you identify and understand the most current retail trends. Last year hundreds of retail businesses across the globe used our research to make critical business decisions. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Conlumino. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Conlumino delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such, Conlumino can accept no liability whatsoever for actions taken based on any information that may subsequently prove to be incorrect. CONTACT US HEAD OFFICE SUBSCRIPTION INQUIRIES John Carpenter House 7 Carmelite Street London EC4Y 0BS UNITED KINGDOM To gain access to Conlumino's suite of research products and bespoke services contact our subscription team. Conlumino Telephone: 2014 +44 This 20 product 7936 is 6400 licensed and is Tel: not to +44 be photocopied 20 7936 6663 or reproduced. Email: info@conlumino.com Email: sales@conlumino.com 16